'Shadowy' 527 political groups would have to report finances under new bill

Sen. Steve Bieda, D-Warren, pictured in his office at the Farnum Building in Lansing Wednesday, October 14, 2015. (Danielle Duval | MLive.com)

LANSING, MI -- Political groups known as 527s would have to publicly disclose donors and expenditures under a bill from Sen. Steve Bieda, D-Warren.

The groups are named for the portion of the Internal Revenue Service code that regulates them. They report to the IRS, but generally only have to report donors if they take in over $25,000, according to information on the IRS website.

"These 527s which are regulated kind of more at the federal level but have such a play in our election cycle that I felt that there needed to be more accountability and transparency and that's why I introduced that legislation," Bieda said.

MLive and the Michigan Campaign Finance Network partnered last year on an investigation that discovered more than a third of the previous legislature was connected to either 527 or nonprofit groups, many of which did not report donors. The funds can accept corporate donations -- something Michigan's candidate committees cannot do. Some Lawmakers who have a 527 or nonprofit say they use them to offset the costs of events and travel related to the job.

Bieda said he has stayed away from forming a 527 in his own fundraising.

"I don't have one, I've never had one, I'm very skeptical of these methods and means to get around publicly disclosing contributions and supporters," Bieda said.

His Senate Bill 281 would loop them into the definition of a committee under the Michigan Campaign Finance Act. Any candidate who "controls or directs" a 527 would need to report it. A candidate would be considered to control or direct it if any officer of the group "is employed by or serves as an agent to the candidate," the bill says.

Michigan Campaign Finance Network Executive Director Craig Mauger said that from the small number of groups that do have to disclose donors to the IRS, they are often groups that actively lobby legislators. That's information he thinks the public should have.

"The public is pretty consistent in their view that a donation to a public officeholder, no matter what form it comes in, should be disclosed," Mauger said.

"The only people who argue that these types of political donations shouldn't be disclosed are public officials and consultants who make money off of this practice."

The 527s sprung up in Michigan after a move to eliminate officeholder expense accounts that existed until the 1990s.

Beida said while donations to an officeholder's candidate committee are publicly disclosed, the 527s "are often shadowy groups, you don't know who's funding them."

The funding can be used for things like office expenses, attending conferences and issue advertisements. By looping them into the state reporting system, as Senate Bill 281 proposes, "It provides an avenue for people to look at who's paying for these ads, who's the dark money behind elected officials or different causes," Bieda said.

Bieda, part of the minority Democratic party in the Senate, has long championed transparency legislation.